FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014 WITH SUMMARIZED FINANCIAL INFORMATION FOR 2013

Transcription

1 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014 WITH SUMMARIZED FINANCIAL INFORMATION FOR 2013

2 CONTENTS PAGE NO. INDEPENDENT AUDITOR'S REPORT 2-3 EXHIBIT A - Statement of Financial Position, as of December 31, 2014, with Summarized Financial Information for EXHIBIT B - Statement of Activities and Change in Net Assets, for the Year Ended December 31, 2014, with Summarized Financial Information for EXHIBIT C - Statement of Cash Flows, for the Year Ended December 31, 2014, with Summarized Financial Information for NOTES TO FINANCIAL STATEMENTS

3 INDEPENDENT AUDITOR'S REPORT To the Board of Trustees Accrediting Council for Continuing Education and Training Washington, D.C. We have audited the accompanying financial statements of the Accrediting Council for Continuing Education and Training (the Council), which comprise the statement of financial position as of December 31, 2014, and the related statements of activities and change in net assets and cash flows for the year then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Council as of December 31, 2014, and the change in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America MONTGOMERY AVENUE SUITE 650 NORTH BETHESDA, MARYLAND (301) FAX (301) MEMBER OF CPAMERICA INTERNATIONAL, AN AFFILIATE OF HORWATH INTERNATIONAL MEMBER OF THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS' PRIVATE COMPANIES PRACTICE SECTION 2

4 Report on Summarized Comparative Information We have previously audited the Council's 2013 financial statements, and we expressed an unmodified audit opinion on those audited financial statements in our report dated April 25, In our opinion, the summarized comparative information presented herein as of and for the year ended December 31, 2013, is consistent, in all material respects, with the audited financial statements from which it has been derived. As discussed in Note 1 to the financial statements, during 2014, the Council changed its method for accounting for accounts receivable and deferred revenue. Management believe the current treatment better represents the activities of the Council. To conform to the current year's presentation, accounts receivable and deferred revenue in the prior year's financial statements were increased by $558,039. This had no effect on the previously reported change in net assets. As discussed in Note 7 to the financial statements, during 2013, the Council understated deferred compensation and salary expense due to a recordation error. Accordingly, the deferred compensation and undesignated net assets at December 31, 2013 shown for summarized purposes in the accompanying financial statements have been retroactively restated. The effect of the correction is a decrease in undesignated net assets of $21,250 at December 31, May 18,

5 EXHIBIT A ACCREDITING COUNCIL FOR CONTINUING EDUCATION AND TRAINING STATEMENT OF FINANCIAL POSITION AS OF DECEMBER 31, 2014 WITH SUMMARIZED FINANCIAL INFORMATION FOR 2013 ASSETS CURRENT ASSETS (As Restated) Cash and cash equivalents $ 289,607 $ 2,516,074 Investments (Notes 3 and 6) 2,235, ,488 Accounts receivable 813, ,438 Prepaid expenses 47,883 48,166 FIXED ASSETS Total current assets 3,386,694 3,521,166 Land 296, ,000 Buildings 1,241,083 1,241,083 Furniture 311, ,152 Computer database 365, ,488 2,214,937 2,147,723 Less: Accumulated depreciation and amortization (896,295) (817,448) Net fixed assets 1,318,642 1,330,275 TOTAL ASSETS $ 4,705,336 $ 4,851,441 CURRENT LIABILITIES LIABILITIES AND NET ASSETS Accounts payable and accrued liabilities $ 95,014 $ 195,904 Accrued salaries and related benefits (Note 7) 65, ,439 Deferred revenue 1,287,846 1,252,338 NET ASSETS Total current liabilities 1,448,630 1,680,681 Unrestricted: Undesignated (Note 7) 3,246,706 3,160,760 Board designated (Note 4) 10,000 10,000 Total net assets 3,256,706 3,170,760 TOTAL LIABILITIES AND NET ASSETS $ 4,705,336 $ 4,851,441 See accompanying notes to financial statements. 4

6 EXHIBIT B ACCREDITING COUNCIL FOR CONTINUING EDUCATION AND TRAINING STATEMENT OF ACTIVITIES AND CHANGE IN NET ASSETS FOR THE YEAR ENDED DECEMBER 31, 2014 WITH SUMMARIZED FINANCIAL INFORMATION FOR 2013 REVENUE Undesignated Unrestricted (As Restated) Board Designated Total Total Sustaining fees $ 1,047,861 $ - $ 1,047,861 $ 1,020,719 Examination fees 1,218,423-1,218,423 1,149,631 Application fees 151, , ,533 Processing and other fees 233, , ,560 Conference, workshops and seminars 203, , ,013 Investment income (Note 3) 16,313-16,313 7,191 EXPENSES Total revenue 2,871,145-2,871,145 2,776,647 Program Services: Council Meetings and Exam Visits 2,292,873-2,292,873 2,243,569 Conventions and Workshops 240, , ,002 Systems/Network Management 128, ,233 86,158 Total program services 2,661,363-2,661,363 2,533,729 Supporting Services: General and Administrative 123, , ,398 Total expenses 2,785,199-2,785,199 2,642,127 Change in net assets 85,946-85, ,520 Net assets at beginning of year, as restated (Note 7) 3,160,760 10,000 3,170,760 3,036,240 NET ASSETS AT END OF YEAR $ 3,246,706 $ 10,000 $ 3,256,706 $ 3,170,760 See accompanying notes to financial statements. 5

7 EXHIBIT C ACCREDITING COUNCIL FOR CONTINUING EDUCATION AND TRAINING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2014 WITH SUMMARIZED FINANCIAL INFORMATION FOR 2013 CASH FLOWS FROM OPERATING ACTIVITIES (As Restated) Change in net assets $ 85,946 $ 134,520 Adjustments to reconcile change in net assets to net cash (used) provided by operating activities: Depreciation and amortization 78,847 73,118 Unrealized loss 3,935 2,207 Realized loss 13,100 10,531 (Increase) decrease in: Accounts receivable (222,923) (502,606) Prepaid expenses 283 (7,160) Increase (decrease) in: Accounts payable and accrued liabilities (100,890) 25,266 Accrued salaries and related benefits (166,669) (60,654) Deferred revenue 35, ,867 Net cash (used) provided by operating activities (272,863) 301,089 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of fixed assets (67,214) (17,259) Purchase of investments (2,077,390) - Sales of investments 191, ,000 Net cash (used) provided by investing activities (1,953,604) 192,741 Net (decrease) increase in cash and cash equivalents (2,226,467) 493,830 Cash and cash equivalents at beginning of year 2,516,074 2,022,244 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 289,607 $ 2,516,074 See accompanying notes to financial statements. 6

8 NOTES TO FINANCIAL STATEMENTS DECEMBER 31, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GENERAL INFORMATION Organization - The Accrediting Council for Continuing Education and Training (the Council) is a non-profit organization, incorporated and located in the District of Columbia. The Council was founded in 1974 for the purpose of improving continuing education and training and has been officially recognized by the U.S. Department of Education since 1978 as a "reliable authority" as to the quality of education and training provided by the institutions they accredit. Basis of presentation - The accompanying financial statements are presented on the accrual basis of accounting, and in accordance with FASB ASC 958, Not-for-Profit Entities. The financial statements include certain prior year summarized comparative information in total but not by net asset class. Such information does not include sufficient detail to constitute a presentation in conformity with generally accepted accounting principles. Accordingly, such information should be read in conjunction with the Council's financial statements for the year ended December 31, 2013, from which the summarized information was derived. Cash and cash equivalents - The Council considers all cash and other highly liquid investments with initial maturities of three months or less to be cash equivalents. Bank deposit accounts are insured by the Federal Deposit Insurance Corporation ( FDIC ) up to a limit of $250,000. At times during the year, the Council maintains cash balances in excess of the FDIC insurance limits. Management believes the risk in these situations to be minimal. Investments - Investments are recorded at their readily determinable fair value. Realized and unrealized gains and losses are included in investment income in the Statement of Activities and Change in Net Assets. Accounts receivable - Accounts receivable are stated at their net realizable value, which approximates fair value. Management considers all amounts to be fully collectible. Accordingly, an allowance for doubtful accounts has not been established. Fixed assets - Fixed assets in excess of $1,000 are capitalized and stated at cost. Fixed assets are depreciated on a straight-line basis over the estimated useful lives of the related assets, generally three to seven years. The cost of maintenance and repairs is recorded as expenses are incurred. Income taxes - The Council is exempt from Federal income taxes under Section 501(c)(3) of the Internal Revenue Code. Accordingly, no provision for income taxes has been made in the accompanying financial statements. The Council is not a private foundation. 7

9 NOTES TO FINANCIAL STATEMENTS DECEMBER 31, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GENERAL INFORMATION (Continued) Uncertain tax positions - For the year ended December 31, 2014, the Council has documented its consideration of FASB ASC , Income Taxes, that provides guidance for reporting uncertainty in income taxes and has determined that no material uncertain tax positions qualify for either recognition or disclosure in the financial statements. The Federal Form 990, Return of Organization Exempt from Income Tax, is subject to examination by the Internal Revenue Service, generally for three years after it is filed. Deferred revenue - Deferred revenue consists of sustaining fees, examination fees, and conference, workshops, and seminars registrations. The Council recognizes sustaining fees on a pro-rata basis over the membership period. The Council recognizes examination fees, conference, workshops, and seminars revenue when the related examination or event has occurred. Net asset classification - The net assets are reported in two self-balancing groups as follows: Unrestricted net assets include unrestricted revenue and contributions received without donor-imposed restrictions. These net assets are available for the operation of the Council and include both internally designated and undesignated resources. Temporarily restricted net assets include revenue and contributions subject to donorimposed stipulations that will be met by the actions of the Council and/or the passage of time. When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the Statement of Activities and Change in Net Assets as net assets released from restrictions. At December 31, 2014, the Council did not have any temporarily restricted net assets. Contributed services - The Council receives volunteers from member institutions who have donated their time in assisting with on-site examination team visits. Management has determined the value of these donated services do not meet the criteria for recognition as contributed services and has not reflected their value in the accompanying Statement of Activities and Change in Net Assets. Use of estimates - The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Accordingly, actual results could differ from those estimates. Functional allocation of expenses - The costs of providing the various programs and other activities have been summarized on a functional basis in the Statement of Activities and Change in Net Assets. Accordingly, certain costs have been allocated among the programs and supporting services benefited. 8

10 NOTES TO FINANCIAL STATEMENTS DECEMBER 31, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GENERAL INFORMATION (Continued) Risks and uncertainties - The Council invests in various investment securities. Investment securities are exposed to various risks such as interest rates, market and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the accompanying financial statements. Fair value measurement - The Council adopted the provisions of FASB ASC 820, Fair Value Measurement. FASB ASC 820 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs (assumptions that market participants would use in pricing assets and liabilities, including assumptions about risk) used to measure fair value, and enhances disclosure requirements for fair value measurements. The Council accounts for a significant portion of its financial instruments at fair value or considers fair value in their measurement. Accounting change - During 2014, the Council changed its method for accounting for accounts receivable and deferred revenue. To conform to the current year's presentation, accounts receivable and deferred revenue in the prior year's financial statements were increased by $558,039. This had no effect on the previously reported changes in net assets. 2. DESCRIPTION OF PROGRAM AND SUPPORTING SERVICES The following program and supporting services are included in the accompanying financial statements: Council Meetings and Exam Visits - The Council oversees three evaluation review cycles per year, during which various accreditation processing activities ensue, with on-site examination team visit reports of initial applicant and current member institutions serving as the core evaluation for their judgment of each institution s compliance with the Council standards relative to objectives, resources, programs, policies and outcomes of the education and training offered. Conventions and Workshops - The Council holds one convention each year and several workshops throughout the year that are designed to provide knowledge about the accreditation process and other relevant information about the industry. Systems/Network Management - The Council has undertaken a major database upgrade, referred to as the Accreditation Management System (AMS), which incorporates upgraded functional efficiencies and effectiveness in all the major process areas, including institutional reporting and records, application submissions, on-site visit and Commission meeting preparations, workshop and conference registrations, and credit card processing. General and Administrative - General and administrative costs are those that are not identifiable with a single program but that are indispensable to the conduct of those activities. They include oversight, business management, record keeping, budgeting and related administrative activities. 9

11 NOTES TO FINANCIAL STATEMENTS DECEMBER 31, INVESTMENTS Investments consisted of the following at December 31, 2014: Fair Value Certificates of deposit 1,724,093 Mutual funds 307,456 Exchange traded funds and closed-end funds 204,294 Included in investment income are the following: $ 2,235,843 Interest and dividends $ 33,348 Unrealized loss (3,935) Realized loss (13,100) TOTAL INVESTMENT INCOME $ 16, BOARD DESIGNATED NET ASSETS As of December 31, 2014, net assets have been designated by the Board of Trustees for the following purposes: Capital Improvements $ 10, RETIREMENT PLAN The Council offers participation in a 403(b) retirement plan with TIAA-CREF for eligible employees. The plan provides for matching contributions by the Council at its discretion which, at present, is 50% of each employee s contribution. Employee contributions may not exceed 10% of each employee s gross annual salary. Employee eligibility in the plan is attained after 90 days of service with the Council. Contributions to the plan during the year ended December 31, 2014 totaled $38, FAIR VALUE MEASUREMENT In accordance with FASB ASC 820, Fair Value Measurement, the Council has categorized its financial instruments, based on the priority of the inputs to the valuation technique, into a threelevel fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial instruments fall within different levels of hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. Investments recorded in the Statement of Financial Position are categorized based on the inputs to valuation techniques as follows: Level 1. These are investments where values are based on unadjusted quoted prices for identical assets in an active market the Council has the ability to access. 10

12 NOTES TO FINANCIAL STATEMENTS DECEMBER 31, FAIR VALUE MEASUREMENT (Continued) Level 2. These are investments where values are based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, or model-based valuation techniques that utilize inputs that are observable either directly or indirectly for substantially the full-term of the investments. Level 3. These are investments where inputs to the valuation methodology are unobservable and significant to the fair value measurement. Following is a description of the valuation methodology used for investments measured at fair value. There have been no changes in the methodologies used at December 31, Certificates of deposit - Generally valued at original cost plus accrued interest, which approximates fair value. Mutual funds - The fair value is equal to the reported net asset value of the fund, which is the price at which additional shares can be obtained. Exchange traded and closed-end funds - The fair value is equal to the reported net asset value of the fund, which is the price at which additional shares can be obtained. The table below summarizes, by level within the fair value hierarchy, the Council's investments as of December 31, 2014: Level 1 Level 2 Level 3 Total Asset Class: Certificates of deposit $ - $ 1,724,093 $ - $ 1,724,093 Mutual funds 307, ,456 Exchange traded and closedend funds 204, ,294 TOTAL $ 511,750 $ 1,724,093 $ - $ 2,235, PRIOR PERIOD ADJUSTMENT During fiscal year 2013, the Council erroneously recorded the final salary payment to the former Executive Director as a reduction in deferred compensation rather than as salary expense. Accordingly, the deferred compensation and undesignated net assets at December 31, 2013 shown for summarized purposes in the accompanying report have been retroactively restated. Following is a summary of the effect of the restatement resulting from the error: Accrued Salaries and Related Benefits Total Expenses Undesignated Net Assets December 31, 2013 balance, as previously stated $ 211,189 $ 2,620,877 $ 3,182,010 Adjustment to correct error 21,250 21,250 (21,250) DECEMBER 31, 2013 BALANCE, AS RESTATED $ 232,439 $ 2,642,127 $ 3,160,760 11

13 NOTES TO FINANCIAL STATEMENTS DECEMBER 31, SUBSEQUENT EVENTS In preparing these financial statements, the Council has evaluated events and transactions for potential recognition or disclosure through May 18, 2015, the date the financial statements were issued. 12